QUADRAMED CORP - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004

¨	Transition Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 0-21031

QUADRAMED CORPORATION

(Exact Name of Registrant as Specified in Its Charter)


DELAWARE		52-1992861
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

12110 SUNSET HILLS ROAD, SUITE 600 RESTON, VIRGINIA		20190
(Address of Principal Executive Offices)		(Zip Code)

(703) 709-2300

(Registrant’s Telephone Number, Including Area Code)


Securities registered pursuant to Section 12(b) of the Act:		NONE

Securities registered pursuant to Section 12(g) of the Act:		Common Stock, $0.01 Par Value Per Share

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Act. Yes x No ¨

As of July 30, 2004, there were 39,659,269 shares of the Registrant’s common stock outstanding, par value $0.01.

QUADRAMED CORPORATION

REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2004

TABLE OF CONTENTS


		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of June 30, 2004 Pro Forma (unaudited), June 30, 2004 (unaudited) and December 31, 2003	3

	Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2004 and 2003	4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) for the six months ended June 30, 2004	5

	Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2004 and 2003	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	38

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	39

Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	39

Item 4.	Submission of Matters to a Vote of Security Holders	41

Item 6.	Exhibits and Reports on Form 8-K	42

	Signatures	44

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

QUADRAMED CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except percentages and per share amounts)


	Pro Forma June 30, 2004 (See NOTE 15)			June 30, 2004			December 31, 2003
	(unaudited)			(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	28,230		$	91,400		$	36,944
Accounts receivable, net		27,584			27,584			30,872
Unbilled and other receivables		7,582			7,582			6,218
Prepaid expenses and other current assets		10,129			10,129			11,268

Total current assets		73,525			136,695			85,302
Restricted cash		3,889			3,889			5,523
Property and equipment, net		6,867			6,867			5,643
Capitalized software development costs, net		2,128			2,128			3,219
Goodwill		32,340			32,340			18,445
Other intangible assets, net		10,032			10,032			6,992
Other long-term assets		7,115			7,852			8,031

Total assets	$	135,896		$	199,803		$	133,155

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses	$	2,815		$	2,815		$	2,914
Accrued payroll and related		9,156			9,156			11,100
Accrued interest		—			1,126			1,912
Accrued dividends payable		14,051			14,051			—
Other accrued liabilities		6,103			6,103			7,866
Deferred revenue		50,325			50,325			48,502

Total current liabilities		82,450			83,576			72,294
10% Senior Secured Notes due 2008, net		—			50,783			61,233
5.25% Convertible Subordinated Notes due 2005		—			56			11,931
Other long-term liabilities		4,667			4,667			4,580

Total liabilities		87,117			139,082			150,038

Stockholders’ equity (deficit)
Preferred stock, $0.01 par, 5,000 shares authorized, 4,000 and 0 shares issued and outstanding, respectively		82,080			82,080			—
Common stock, $0.01 par, 150,000 shares authorized; 39,657 and 28,871 shares issued, respectively		397			397			290
Treasury stock at cost, 0 and 200 shares, respectively		—			—			(822	)
Additional paid-in-capital		301,007			301,007			292,716
Deferred compensation and accumulated other comprehensive loss		(2,437	)		(2,437	)		(2,951	)
Accumulated deficit		(332,268	)		(320,326	)		(306,116	)

Total stockholders’ equity (deficit)		48,779			60,721			(16,883	)

Total liabilities and stockholders’ equity (deficit)	$	135,896		$	199,803		$	133,155

The accompanying notes are an integral part of these condensed consolidated financial statements.

QUADRAMED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)


	Three months ended June 30,						Six months ended June 30,
	2004			2003			2004			2003
Revenue
Services	$	4,849		$	4,716		$	9,276		$	9,461
Maintenance		10,126			9,192			20,229			17,766
Installation and other		4,706			4,382			9,642			8,556

Services and other revenue		19,681			18,290			39,147			35,783
Licenses		11,182			10,161			23,673			19,717
Hardware		1,035			985			5,548			3,171

Total revenues		31,898			29,436			68,368			58,671

Cost of revenue
Cost of services and other revenue		9,541			11,133			19,156			21,786
Cost of licenses revenue		3,497			1,772			6,555			3,610
Cost of hardware revenue		775			622			3,606			2,437

Total cost of revenue		13,813			13,527			29,317			27,833

Gross margin		18,085			15,909			39,051			30,838

Operating expenses
General and administration		8,217			8,714			17,528			20,811
Software development		6,835			5,032			13,945			10,325
Sales and marketing		6,029			4,810			11,855			10,522
Amortization of intangible assets and depreciation		1,154			1,498			2,409			3,028

Total operating expenses		22,235			20,055			45,737			44,686

Loss from operations		(4,150	)		(4,146	)		(6,686	)		(13,848	)

Other income (expense)
Interest expense		(2,416	)		(3,042	)		(4,904	)		(4,105	)
Interest income		127			130			244			287
Other income (expense), net		(85	)		784			118			714
Loss on retirement of debt		(3,145	)		—			(3,145	)		—

Other income (expense)		(5,519	)		(2,128	)		(7,687	)		(3,104	)

Loss before income taxes		(9,669	)		(6,274	)		(14,373	)		(16,952	)
Provision for income taxes		—			—			163			—

Net loss	$	(9,669	)	$	(6,274	)	$	(14,210	)	$	(16,952	)

Loss per share